Americold Realty Trust(COLD) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated AFFO of approximately $109 million or $0.38 per share, an increase of over 36% from Q2 last year [4] - Core EBITDA reached $165 million, a year-over-year increase of 24.7%, resulting in an industry-leading EBITDA margin of 25% [4] - Same-store warehouse services margins delivered a second consecutive quarter of double-digit margins at 13.2% [4][5] Business Line Data and Key Metrics Changes - Global warehouse same-store NOI grew 19.3% year-over-year, driven by increased warehouse services margins contributing an incremental $40 million of NOI [5] - Rent and storage revenue derived from fixed commitment storage contracts increased to 56.6%, marking a 240 basis point increase from the previous quarter and an 810 basis point increase from Q2 2023 [8][17] Market Data and Key Metrics Changes - Economic occupancy dipped slightly to 78.1% [8] - Same-store rent and storage revenue per economic occupied pallet on a constant currency basis increased by 7.2% year-over-year [11][16] - Same-store service revenue per throughput pallet on a constant currency basis increased by 12% [11][16] Company Strategy and Development Direction - The company is focused on Project Orion, a transformation program aimed at driving future growth through technology and process improvements [6][7] - The company plans to invest $200 million to $300 million in development starts for 2024, up from $100 million to $200 million last year [12] - Strategic partnerships with Canadian Pacific Kansas City railway and DP World are expected to create significant development opportunities, with a potential pipeline of $500 million to $1 billion [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow despite current consumer challenges, anticipating a recovery in consumer demand [33] - The company raised its full year 2024 AFFO per share guidance to a range of $1.44 to $1.50, reflecting a 16% increase from 2023 [14] - Management noted that the recent entrance of another publicly traded cold storage company is positive for the industry, bringing more investment and competition [15] Other Important Information - The company experienced negligible disruption from recent global cybersecurity incidents [7] - The workforce retention metrics have improved, with associate turnover finishing the quarter at 38%, a 200 basis point improvement from the first quarter [10] Q&A Session Summary Question: Are there specific categories driving lighter throughput volumes? - Management indicated that overall weak consumer demand and high grocery prices are affecting throughput volumes, with no specific category identified [35] Question: How should economic occupancy be viewed in the current environment? - Management noted that while the gap between physical and economic occupancy has narrowed, it is expected to improve as consumer disposable income increases [40][41] Question: What are the expectations for pricing power in the warehouse business? - Management expects pricing to remain stable, with anticipated growth in rent and storage revenue per economic occupied pallet in the range of 4% to 5% [29][46] Question: How much of the warehouse service margin increase is due to labor improvements? - Management stated that approximately 75% of the improvement in service margins is attributed to a more stable and productive workforce, with the remaining benefits coming from system improvements [55][56] Question: What are customers saying about their current inventory levels? - Customers prefer higher demand and revenue, indicating that current low demand is not satisfactory for their operations [59]